Dell Technologies is spinning off its 81 per cent equity ownership of VMware, a move the virtualization firm says will provide itself with “increased freedom” without sacrificing the benefits of their strategic partnership.
Dell plans to offer VMware shareholders a special dividend of between $11.5 and $12 billion. Based on the current ownership in VMware, Dell would receive anywhere between $9.3 to $9.7 billion, according to an April 14 news release. The transaction is expected to close during the fourth quarter of calendar 2021.
The goal for both companies is to stick to what they do best and work on co-developed solutions. For Dell, that means an ongoing emphasis on the core infrastructure and PC business with a growing partner ecosystem. VMware will continue to use Dell Financial Services to help its customers finance their projects.
“By spinning off VMware, we expect to drive additional growth opportunities for Dell Technologies as well as VMware and unlock significant value for stakeholders,” said Michael Dell, chairman and chief executive officer of Dell Technologies. “Both companies will remain important partners, providing Dell Technologies with a differentiated advantage in how we bring solutions to customers. At the same time, Dell Technologies will continue to modernize its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge and telecom.”
Michael Dell will to remain chairman and CEO of Dell Technologies and the chairman of the VMware board, so while the spin-out is happening, the two tech giants remain tightly connected.
Zane Rowe will remain the interim CEO for VMware with no change to its board of directors.
In a separate press release, VMware said the split provides them with “increased freedom to execute its strategy, a simplified capital structure and governance model and additional strategic, operational and financial flexibility, while maintaining the strength of the two companies’ strategic partnership.”